Edison Electric Institute (EEI) President Thomas R. Kuhn called on Congress to change tax laws to promote investment in power generation and transmission.
He asked Congress to remove tax impediments to investment in electricity infrastructure by shortening depreciable lives for electric transmission, distribution and generation facilities, similar to the depre-ciation schedules of other capital-intensive industries.
Kuhn also encouraged lawmakers to amend the federal tax code to defer taxes on the sale and eliminate taxes on the spin-off of transmission facilities. “Companies should not be placed at a tax disadvantage if they surrender control of those trans-mission assets as FERC develops wholesale electricity markets,” Kuhn said. He indicated that H.R. 4, the energy bill passed by the House in 2001, does provide for the deferral or elimination of those taxes.
Competitive wholesale and retail electricity markets are placing great demands on a transmission grid that was not designed for large numbers of transactions. The transmission capacity of the U.S. electricity market needs to be increased now, Kuhn declared. The demand for electricity is increasing rapidly, but transmission investments in 1999 were less than half of what they were in 1979.
According to FERC, transmission bottlenecks cost consumers more than $1 billion over the past two summers alone. Financial incentives, such as higher rates of return, are needed to attract capital to fund investments in transmission expansion. Congress should seek to ensure that FERC’s policies do not impede or discourage private investment in transmission.
The Public Utility Holding Company Act (PUHCA) should be repealed because it acts as a barrier to the formation of interstate independent transmission companies, Kuhn added. Regional transmission organizations (RTOs) are expected to play a critical role in planning new transmission infrastructure in the future. But PUHCA is an impediment to forming those organizations. An RTO could be required to become a registered holding company and subject to PUHCA restrictions and additional regulation, for example. PUHCA restrictions also are a significant concern to Wall Street firms and a barrier to investment.